EX 4-11 Balance sheet classification

At the balance sheet date, a business owes a mortgage note payable of $480,000, the terms of which provide for monthly payments of $2,500.

Explain how the liability should be classified on the balance sheet.

Answer:
Since current liabilities are usually due within one year, $30,000 ($2,500 × 12
months) would be reported as a current liability on the balance sheet. The remainder of $450,000 ($480,000 – $30,000) would be reported as a long-term liability on the balance sheet.